Try our PS 58 or Table 2001 Calculator
When life insurance is included in a qualified retirement plan—like a profit-sharing plan or a defined benefit plan—the IRS requires that participants report the value of the “economic benefit” of the life insurance protection they receive. This amount is called the PS 58 cost (or Table 2001 cost).
In plain terms, the PS 58 cost represents the taxable value of the pure insurance protection inside the retirement plan. While the plan pays premiums with deductible contributions, participants must recognize this small annual cost as taxable income on Form 1099-R. It ensures that life insurance in qualified plans maintains IRS compliance and does not become a completely tax-free perk.
Manually determining PS 58 costs can be confusing. Calculations depend on the insured’s age, the type of policy, the face amount of insurance, and whether the IRS Table 2001 or carrier-specific rates are applied. Even small mistakes can lead to inaccurate reporting, which may trigger compliance issues or unnecessary tax burdens.
Our PS 58 Cost Calculator simplifies the process. By entering basic details—such as age, gender, and policy coverage—the calculator quickly estimates your annual imputed cost. This makes it easier for participants, employers, and advisors to understand the tax impact of including life insurance in a qualified plan.
Note: This calculator is meant only for informational purposes and should not be used for 1099-R reporting. Emparion makes no warranties on the results obtained by its use, and disclaims any liability arising out of its use. Please consult your plan administrator regarding your specific situation.
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Key Benefits of the Calculator
- Saves Time: Instead of sorting through IRS tables and formulas, you get an instant calculation.
- Ensures Accuracy: The calculator applies the correct formulas, minimizing reporting errors.
- Supports Compliance: Clear, accurate cost estimates help maintain IRS and plan documentation standards.
- Improves Planning: Knowing your PS 58 costs helps you weigh the advantages of including life insurance in your plan.
Easy to Use: A simple interface makes this tool accessible for business owners, advisors, and participants alike.
Why Understanding PS 58 Costs Matters
The IRS Perspective
The IRS created the PS 58 cost framework to prevent abuse. Without these rules, individuals could use qualified plans to fund large life insurance policies entirely tax-free. By requiring participants to report the annual economic benefit, the IRS ensures fairness and preserves the primary retirement purpose of the plan. The PS 58 cost is not intended to be punitive. Instead, it provides a balanced way for life insurance and retirement benefits to coexist in a qualified plan.
Many employers use profit-sharing plans or defined benefit plans that include life insurance. For example, a business owner might fund a policy through deductible contributions. Each year, the participant recognizes a small PS 58 cost, which is typically far less than the overall deduction achieved by the business. The result is a net win: the business receives a deduction, the participant gains valuable protection, and compliance with IRS rules is maintained.
Policy Selection and Its Impact
The type of policy chosen directly impacts PS 58 calculations. Whole life insurance, universal life, or variable universal life can all be included in a plan, but term life generally cannot. Since PS 58 costs reflect the pure insurance component, policies with higher death benefits result in higher imputed income. By using the calculator, participants can model different coverage amounts and policy types to see the annual tax impact before committing.
Every year, the plan administrator must calculate and report PS 58 costs for each participant with coverage. These costs are added to the participant’s taxable income, often shown on a Form 1099 or similar tax reporting document. For individuals, this means anticipating the annual taxable amount and planning accordingly. For employers, it means maintaining accurate records to support IRS audits or inquiries.
Basis Building Advantage
One overlooked benefit of the PS 58 cost is its role in building policy basis. Each year that imputed income is taxed, it adds to the participant’s cost basis in the policy. This becomes critical when the policy is eventually distributed from the plan or surrendered. The higher the basis, the lower the taxable gain upon distribution. The calculator helps users see not just the annual cost, but also the long-term advantage of basis accumulation.
Financial advisors and CPAs can use PS 58 cost calculations as part of their client strategy. By showing clients the modest annual costs compared to the significant deductions available to the business, advisors can illustrate the net tax efficiency of including life insurance in a qualified plan. The calculator provides a clear and credible way to communicate these numbers, supporting better decision-making and stronger client trust.
Putting It All Together
At first glance, PS 58 costs may seem like a small detail. But for participants and businesses using retirement plans with life insurance, they represent a key compliance and planning issue. By leveraging the PS 58 Cost Calculator, individuals gain clarity, businesses maintain compliance, and advisors deliver better outcomes. Transparency leads to confidence, and confidence leads to smarter planning decisions.